Bill 4141

                    Current Status

Introducing Body:               House
Bill Number:                    4141
Ratification Number:            297
Act Number:                     280
Primary Sponsor:                J. Bailey
Type of Legislation:            GB
Subject:                        Insurers, certificates of
                                deposit
Companion Bill Number:          1150 1263
Date Bill Passed both Bodies:   Feb 27, 1992
Computer Document Number:       NO5/7937.BD
Governor's Action:              S
Date of Governor's Action:      Mar 10, 1992
Introduced Date:                Jan 14, 1992
Last History Body:              ------
Last History Date:              Mar 10, 1992
Last History Type:              Act No. 280
Scope of Legislation:           Statewide
All Sponsors:                   J. Bailey
                                Corning
                                McElveen
                                Quinn
                                Scott
Type of Legislation:            General Bill

 Bill  Body    Date          Action Description              CMN
 ----  ------  ------------  ------------------------------  ---
 4141  ------  Mar 10, 1992  Act No. 280
 4141  ------  Mar 10, 1992  Signed by Governor
 4141  ------  Mar 04, 1992  Ratified R 297
 4141  Senate  Feb 27, 1992  Read third time, enrolled for
                             ratification
 4141  Senate  Feb 26, 1992  Read second time, unanimous
                             consent for third reading on
                             Thursday, February 26, 1992
 4141  Senate  Feb 25, 1992  Introduced, read first time,
                             placed on Calendar without
                             reference
 4141  House   Feb 20, 1992  Read third time, sent to
                             Senate
 4141  House   Feb 19, 1992  Read second time
 4141  House   Feb 12, 1992  Committee Report: Favorable     26
 4141  House   Jan 14, 1992  Introduced, read first time,    26
                             referred to Committee

(A280, R297, H4141)

AN ACT TO AMEND SECTION 38-9-80, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO CERTIFICATES OF DEPOSIT OR SECURITIES REQUIRED OF INSURERS, SO AS TO AUTHORIZE THE INSURANCE COMMISSIONER TO REQUIRE DEPOSITS IN EXCESS OF THE LIMITS IN THE SECTION; TO AMEND SECTION 38-9-100, RELATING TO CONDITIONS UNDER WHICH DEPOSITS ARE NOT NECESSARY, SO AS TO AUTHORIZE THE COMMISSIONER TO REQUIRE A DEPOSIT OF QUALIFIED INSURERS INSTEAD OF REQUIRING THE INSURER TO BE RELIEVED OF MAKING THE DEPOSIT; AND TO AMEND SECTION 38-33-130, RELATING TO SECURITY DEPOSITS AND OTHER REQUIREMENTS FOR HEALTH MAINTENANCE ORGANIZATIONS, SO AS TO REQUIRE THE ORGANIZATIONS TO SATISFY THE REQUIREMENTS APPLICABLE TO AN INSURER FOR THE RETURN OF DEPOSITED SECURITIES.

Be it enacted by the General Assembly of the State of South Carolina:

Requirement of excess deposits

SECTION 1. Section 38-9-80 of the 1976 Code is amended to read:

"Section 38-9-80. (A) The commissioner shall require every insurer, other than fraternal benefit societies, transacting, or desiring to transact, business in this State to deposit with him certificates of deposit of building and loan associations chartered by South Carolina or federal savings and loan associations located within the State in which deposits are guaranteed by the Federal Savings and Loan Insurance Corporation, not to exceed the amount covered by insurance, or of national banks located within the State or banks chartered by South Carolina in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount covered by insurance; or other securities which:

(1) qualify as legal investments under the laws of this State for public sinking funds;

(2) are not in default as to principal or interest;

(3) have a current market value of not less than ten thousand nor more than two hundred thousand dollars, as determined by the commissioner pursuant to the standards promulgated by him.

(B) The commissioner shall prescribe the amount, within the limits of this section, of the securities required, and he subsequently may increase or decrease the amount required.

(C) Notwithstanding the limitations in this section as to the amount of deposits required, the commissioner may require an insurer to deposit an amount of securities in excess of the limits based on his consideration of the following:

(1) adverse findings reported in financial condition and market conduct examination reports;

(2) the National Association of Insurance Commissioners Insurance Regulatory Information System and its related reports;

(3) the ratios of commission expense, general insurance expense, policy benefits, and reserve increases as to annual premium and net investment income which could lead to a significant adjustment to an insurer's capital and surplus;

(4) whether the insurer's asset portfolio when viewed in light of current economic conditions is not of sufficient value, liquidity, or diversity to assure the insurer's ability to meet its outstanding obligations as they mature;

(5) whether an insurer had a significant operating loss in the last twelve months or a shorter time;

(6) whether an affiliate, subsidiary, or a reinsurer is insolvent, threatened with insolvency, or delinquent in payment of its monetary or other obligations;

(7) contingent liabilities, pledges, or guaranties which individually or collectively involve a total amount which in the opinion of the commissioner may affect the solvency of the insurer;

(8) whether the management of an insurer, including officers, directors, or other persons who directly or indirectly controls the operation of the insurer, fails to possess and demonstrate the competence, fitness, and reputation necessary to serve the insurer in that position;

(9) whether management has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry;

(10) whether the insurer has grown so rapidly and to an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;

(11) whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems."

Deposit required of qualified insurers

SECTION 2. Section 38-9-100 of the 1976 Code is amended to read:

"Section 38-9-100. If a qualified insurer deposits with an officer or official body of another state for the protection of all its policyholders, or all its policyholders and creditors, acceptable securities not in default as to principal or interest and of a current market value of not less than one million dollars, and delivers to the commissioner a certificate to that effect, authenticated by the appropriate state official holding the deposit, the insurer may be relieved of making the deposit required by Section 38-9-80. For the purpose of this section a `qualified insurer' is a licensed stock insurer possessed of at least ten million dollars of capital and surplus or a licensed mutual, fraternal, or reciprocal insurer possessed of at least ten million dollars of surplus, according to its most recent annual statement filed with the commissioner and, in the discretion of the commissioner, may include eligible surplus lines insurers which meet these capital and surplus requirements. For the purpose of this section, `acceptable securities' means bonds of the United States or of a state of the United States, or of a municipality or county, upon which is pledged the full faith and credit of the appropriate political division, or bonds or notes secured by mortgages or deeds of trust on otherwise unencumbered real estate of a market value of not less than double the amount loaned, or other securities approved by the commissioner."

Health maintenance organizations to satisfy insurer requirements for return of deposited securities

SECTION 3. Section 38-33-130(A) of the 1976 Code is amended to read:

"(A) Each health maintenance organization shall deposit and maintain with the commissioner cash or securities which qualify as legal investments under the laws of this State for public sinking funds in the amount of three hundred thousand dollars. The commissioner may require a health maintenance organization to make deposits in excess of the amount specified in this section if in his opinion the additional deposits are necessary for the protection of enrollees and the public. All income from deposits must belong to the depositing organization and must be paid to it as it becomes available. A health maintenance organization that has made a security deposit may withdraw that deposit or part of it after making a substitute deposit of cash, securities, or a combination of these of equal amount and value. Securities must be approved by the commissioner before being substituted. The return of cash or securities deposited with the commissioner by a health maintenance organization pursuant to this section is governed by Section 38-9-150."

Time effective

SECTION 4. This act takes effect upon approval by the Governor.

Approved the 10th day of March, 1992.